Retirement Savings: Dealing with Investment Losses

By John Trezza, Vice President, Financial Services
Infinex Financial Group located at 3rd Federal Bank

Historically, the stock market has had its ups and downs. If you’re closing in on retirement or you’re already there, a dip in your savings due to the recent downturn in the market may affect how much you can safely withdraw and how long your savings will last.

Investment losses can have a significant impact on your retirement savings. For example, on October 22, 2007, the value of the S&P 500 was about 1,500. On October 20, 2008, it had dropped to approximately 950—a decrease of almost 38%. The S&P 500 would have to go up by about 60% to get back to 1,500. If your retirement savings endures a similar performance, what can you do? How long will it take to recoup such losses?

Here are some things to consider:

Postponing retirement lets you continue to add to your retirement savings, which can offset losses caused by poor investment performance. Also, working allows you to delay withdrawing from your savings. That could allow more time for your retirement accounts to recover from investment-related losses.

If you delay applying for Social Security retirement benefits until your full retirement age, you can get as much as 30% more in monthly payments compared to taking benefits early. And, for each year you defer benefits past your full retirement age (between 65 and 67, depending on when you were born) to age 70, your benefit is increased by as much as 8%.

You may consider using some of your retirement savings to purchase a fixed single premium immediate annuity (SPIA). The benefit of a SPIA is that it provides a steady income for either a fixed period of time or for the rest of your life, or for the joint lives of you and your spouse (subject to the claims-paying ability of the annuity issuer). However, a SPIA might not be for everyone. While the income is dependable, you may not be able to change the amount of income payments you receive or their duration once you’ve started. Consult with your financial professional for help in deciding if a SPIA is the right choice for you.

The current economic downturn is no reason to stick your head in the sand. While it may be hard to review those statements, especially if they’re filled with red numbers, take the opportunity to review your retirement savings plan and consider adjustments that might help you rebuild your nest egg.

John Trezza has more than 20 years of experience matching clients with investments and he has worked as a financial consultant in the banking industry for more than 15 years. He is available for personal or group consultations with no obligation. To learn more, contact him at Infinex Financial Group located at 3rd Federal Bank at (267) 757-8919 or jtrezza@infinexgroup.com.

Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. In Massachusetts, insurance products are offered through Infinex Insurance Agency of Massachusetts, Inc. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value. NOT FDIC-INSURED. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. NOT GUARANTEED BY THE BANK. MAY GO DOWN IN VALUE.